Save often.
The game difficulty doesn't affect loot. It just modifies the damage formula for your character and the computer controlled characters.
At Normal difficulty, you are pretty much playing on an even scale with the AI.
Increasing the difficulty causes your character to take more damage while the AI takes less.
Decreasing the difficulty causes your character to take less damage, and the AI takes more.
The experience gain formula is also affected. You'll gain more XP for playing at a more difficult setting than you will playing at an easier setting.
Well then, don't I feel like an idiot. I was sure loot was affected. Ah well, that makes it more viable for me. I think I'll start a Very Hard or Hard save tonight.